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EJCEYear: 2011, June. Volume: 8 - Issue: 1

Some comparative economics of the organization of sports: competition and regulation in north American vs. European professional team sports leagues

Keywords:sports economics, comparative economics, economic organisation, governance, sports leagues, Walrasian model, Nash equilibrium, competitive balance, regulation, soft budget constraint, TV rights, wages, profit maximising, win maximisingAbstract:This article contends that a new research avenue is open to comparative economics which is the
economic comparison between American (closed) and European (open) professional team sports
leagues. It starts with sketching the major institutional differences between the two leagues systems. Then it surveys the American modelling of competitive balance in these sports leagues that objects pro-competitive balance regulation as being non Walrasian when (American) teams are profit maximising. A next step is to cover how the Walrasian model has been adapted to European open leagues and their regulation of win maximising clubs under a hard budget constraint. Such approach has recently been outdated by models where win maximising clubs operate with a flexible supply of talent in a non cooperative game, given the globalization of the labour market for sporting talent (namely after the Bosman case). Finally, the article ploughs into a new research path advocating for a disequilibrium model where clubs would have a "soft" budget constraint rooted in their weak governance, and empirically tests a vicious circle between TV rights revenues and wages in French football that may explain the aforementioned disequilibrium.